This necessitates that I keep my 8-5 job for a little while longer until my wife feels comfortable with a successful flip.

I know your Dad is doing the management for free but to evaluate as an investment, the modifications must be made.I don't know how much cash would be thrown off  if you sell. 

I then went to the banks  explaining the situation and they explained they would be willing to due a loan modification and they gave me a rough estimate that the monthly payment would be reduced to 1800. 

From one person to the next, then when all the paperwork was in, they called and said someone accidentally opened a modification file , so the account went to mod, then I had to have them re-open a short sale status file again.. finally, then one person to the next again and again.

The note holder could agree to modifications or extensions if the property did not sell, doesn't have to, 2 years is plenty of time to flip most projects.

Based on your response above, it appears that USDA loans can't be used for any income producing properties, which would necessitate me using a FHA loan.  

This means that while they are often badly maintained, at least they typically don't contain weird DIY modifications.

I rent to agencies that sometimes get Medicaid to pay for modifications but it's a process and it's not something I have done myself. 

I think it could get down to about $15-25 per unit range with the right modifications. 

How about modification or forbearance?